I found a great post from Mark Lawler on SAO’s LinkedIn Group… outlines notes from a recent VC panel (Silicon Valley) per the current funding mindset.
The text is quoted as follows:
“… LinkedIn Discussion ： SAO Group ： 5/14/10
What one VC Panel says is “hot” this year… posted by Mark Lawler, VP, Technology at Thomson Reuters - Sabrix
A colleague of mine attended a panel discussion regarding VC funding in the Silicon Valley this past week. The panel consisted of Emergence Capital, Crosslink Capital, and Trident and William Blair (ibank).
I thought I’d share the highlights from the panel:
• SaaS is yesterday’s terminology. “Cloud” is now used as “SaaS 2.0”.
• Each firm made about 2-3 investments each year in 2008 and 2009. This year, most are on track for 8-12 investments.
• Anything that is not “cloud” in the technology community is “not getting funded”.
• Companies that received investment in 2008 and 2009 are over-valued – too many dollars chasing too few good deals. Same is true for 2010.
• VCs look for marketing and sales analytical rigor – cost of acquisition, retention/churn, lifetime value of a customer, incremental contribution margin per customer.
• Value customer segmentation: not enough to say you sell to the SMB (horizontal) – which part?
• Support annual contracts collected up front vs. quarterly or monthly – valued for the cash flow.
• Have evaluated the SaaS 1.0 companies and determined that they need more patience in building a company vs. capital efficiency.
• Looking for business processes that can only be automated thru the cloud. Ideally have a viral component.
• Looking for businesses that leverage the cloud (SFDC platform, Azure, etc.) – example of company that built on SFDC & immediately began selling to larger customers and having global customer access.
• Anything that can be viral in B2B – freemium model & WoM.
• M&A activity expected to accelerate in next 2 quarters as the SaaS 1.0 movers get enough momentum and resources to buy… examples were SFDC & SuccessFactors.
Best, Mark …”